Today, @Noah Bacon published an interested article to the blog that got me thinking - large apartment buildings often offer concessions - like first month reduced rent, or sometimes even referral programs. But it's not something I've considered as I personally manage my own small rental portfolio. In his article, Noah discusses why he thinks mom-and-pop or private landlords should NOT offer concessions and I want to hear your opinions! Have you ever offered them to entice renters? If so how did it turn out and how did you decide what to offer? Taking it one step further - have you ever been open to negotiating with prospective tenants or tenants who want to renew? '' Check out Noah's article and his reasons why he thinks rent offers and concessions are not a good tool for private landlords here

Have you ever offered rent concessions to entice potential renters?

Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes

I always play it by ear. If I have a potential tenant that I like then I work with them.

I just turned over a unit in middle of August. I liked the tenant, school is starting back etc, I told them they could pay first month and security deposit and I would let them have the rest of August for free. I did make sure they got the utilities switched over in to their name which took a few days.

All in all, it was maybe 7-10 days left in august by the time they got all the utilities switched etc. This made it much easier for them in terms of moving as they didn’t have to be rushed.

So I don’t “advertise” any incentives, but I do what I think is reasonable if I think they will be good tenants.

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Greg ScottPro Member

Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes

2y

Concessions, when used poorly are dangerous to your business. In my opinion, they should be used surgically, and not as blunt instruments.

The most dangerous are "First month free" and the like. They encourage deadbeats and liars to apply. Usually, by the second month, you are figuring out how to evict.

Sometimes we have a specific unit that has been on the market a long time. We'll try to figure out if there is some defect causing that unit to sit. If there is no obvious reason, we know the staff still sometimes can develop a superstition around that unit. In those cases we may offer "one month free" but it will be the third month that is free. We still require a deposit plus the first month to move in. The resident pays the second month on time and then, and only then, do they get the concession.

If the market is soft, and we are having trouble renting, before we consider concessions, we look at the product, the marketing, and lastly the price. We are more likely to simply reduce our asking rent than offer a concession.

FWIW, I did not read the attached article.

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Greg ScottPro Member

Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes

2y

Quote from @Derrick E.:

I always play it by ear. If I have a potential tenant that I like then I work with them.

I liked the tenant, school is starting back etc, I told them they could pay first month and security deposit and I would let them have the rest of August for free.

This is an obvious fair housing law violation because you are choosing which prospect get the concession. DO NOT DO THIS. It could cost you dearly in the future.

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Henry T.

Member since 2022 · 1k+ posts · 1k+ votes

2y

Never and never will.

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

2y

I've managed up to 400 rentals and never offered a concession. If the market is tough, I reduce the rent rate over the full 12-month term. No free weeks, no reduced deposit, etc.

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Derrick E.

Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes

2y

Quote from @Greg Scott:

Quote from @Derrick E.:

I always play it by ear. If I have a potential tenant that I like then I work with them.

I liked the tenant, school is starting back etc, I told them they could pay first month and security deposit and I would let them have the rest of August for free.

This is an obvious fair housing law violation because you are choosing which prospect get the concession. DO NOT DO THIS. It could cost you dearly in the future.

That’s not true. It’s not something I do every time, or even often for that matter. I’m allowed to help someone out if I want to do so.

It’s not advertised, then I deny someone cause I don’t like them for some reason etc.

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Greg ScottPro Member

Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes

2y

Quote from @Derrick E.:

That’s not true. It’s not something I do every time, or even often for that matter. I’m allowed to help someone out if I want to do so.

It’s not advertised, then I deny someone cause I don’t like them for some reason etc.

Derrick:

I 100% know what I'm talking about. You are now warned. If you choose to play with fire, that is your perogative.

For your reference, here is a good primer.

Here is the key paragraph:
Rental discrimination is when a landlord or property manager treats an applicant differently based on the applicant’s inclusion in a protected class. Courts recognize that discrimination may result from both intentional and unintentional conduct.

The important term is "protected class". By its own definition, everybody alive is a member of several protected classes. This is not just a racial issue.

You have already admitted that you treat each person differently. If a tenant, applicant, or prospective applicant finds out that you treated them differently, they can file a complaint saying you discriminated against them. As the above paragraph says they assume you may have UNINTENTIONALLY discriminated, so the burden of proof is largely on your shoulders.

Good luck.

2 Reply

Adam BartomeoBusiness Member

Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes

2y

We have never been fans of offering concessions. They are too much of a gimmick and most tenants prefer to have the bottom-line expenses. We are always willing to entertain negotiation with our tenants. We have been lowering rents for lots of our tenants to match market rents and reduce turnover.

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Gabe R. Gonzalez

Property Manager · Chicago · Member since 2021 · 61 posts · 32 votes

2y

@Rene Hosman The only time I've seen them is larger buildings that have financing and the success of the project is contingent on a certain occupancy number, but then again what project isn't :)

That being said, I'd always write concessions to start on the second month of full rent. Don't give the free month on the first month in the unit. Don't amortize the concession, that affects your NOI and the valuation of the asset.

What it comes down to for these larger buildings that use concessions is that they underwrote the project with a certain GPR. Sometimes the market changes or can't absorb the rents that they want, so they issue concessions to make it appear as if it's performing as intended. They calculate a "net effective" rent that's more appealing to the tenant, basically amortizing the concession over the lifetime of the lease. They advertise this and open the unit up to a larger tenant pool. What often happens is folks move in, find that they can't afford the actual rent and then move out the next year.

You're then stuck in a cycle of offering concessions every year to fill your building because you were too ambitious during underwriting.

TLDR: I don't see a reason for small landlords to use concessions - either the price is too high or you need a remodel if your unit isn't renting. For larger buildings with financing, it's worth the administrative burden and the potential for higher churn, just for the sake of preserving occupancy.

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Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

2y

Context matters: for some apartment buildings that compete head to head with a very similar property just down the street, this may be a good strategy.

We rent premium single family homes and I have never offered an incentive. Most rental properties in Milwaukee are old and run down, our product stands out. There is usually not much that compares with what we offer, so we only compete apples to oranges, so incentives are not a good tool for us.

The types of tenants we want (multi year) also respond better to an adjustment in rent than an incentive. First month free only attracts people who move every 12 months.

2 Reply

Eric Gerakos

Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes

2y

If you buy upscale (desirable) properties in desirable areas as opposed to affordable (undesirable) crapboxes in undesirable areas you won’t need to entice tenants. I have a waiting list for tenants as my rentals are all where people actually want to live.

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Michael K GallagherBusiness Member

Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes

2y

If it were an outstanding applicant and I was trying to get there business i may try to entice them, but generally I'm going to offer things like discounts on rent if they wanna sign for more than a year.

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Ray Hage

Investor · Fort Lauderdale, FL · Member since 2020 · 1k+ posts · 755 votes

2y

Maybe for those large MF buildings, concessions and enticements make sense. But I believe for the majority of mom and pop landlords, it's not worth offering a concession. Just have a good house/apartment at a fair market price and you should be able to find a tenant without a ton of effort.

Here is one potential example of a small concession I might offer. Let's say the 1st is on a Monday. If the unit is empty and the potential tenant seems great, I would let them move in on the 29th or 30th of the previous month since most tenants will prefer to move on the weekend and I won't ask rent for those 1-2 days (of course utilities have to be in their name, etc).

2 Reply

Noah BaconPro Member

Property Manager · Lansdale, PA · Member since 2021 · 844 posts · 1k+ votes

2y

Great replies here, and thank you for sharing examples of what you have or have not done as a private landlord.

I do think there is a time and place to offer concessions, just not for people like you and me that are owning/managing portfolios smaller than an apartment complex with 100's of units.

@Ray Hage thank you for your example, and can say I've done the same thing for as long as utilities are setup prior to move in, security deposit is paid, and first month's rent in full is paid. I would warn you though as soon as you give an inch, the next month if rent is not paid on time you may have opened up a door of forgiveness that was not intentional. One day is not a big deal for a weekend move in, but one day late every month is a problem that may have been created from day one.

I am not a fan of concessions as I believe that it will attract lower quality, shorter term tenants. Dropping your rental rate and remaining competitive in the market, will attract the right tenant based on your initial application and screening requirements. Do not go changing your processes!

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Roy Logan

Rental Property Investor · MI · Member since 2024 · 15 posts · 7 votes

1y

I have a long term tenant that I offered concessions to around month 7. As a very small portfolio owner myself... I saw this as a way to avoid a potential month loss rent due to tenant vacancy. My tenant appreciated it and signed again. In the end my tenant received a reward for being respectful to my property and I am now have this unit locked until next year with a small dip is gross rev!. win win in my eyes.

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

1y

Yes Ive done a free months rent is lease signed by X date before

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Stephen Morales

Jacksonville, FL · Member since 2016 · 34 posts · 19 votes

1y

When I had my own PM company here in Jax, we had some properties that lets just say were harder to move. We often would offer concessions such as no security deposit or do half off first months rent or even a discount off the first couple of months. We would normally negotiate this on a case by case basis.

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Kyle MccawBusiness Member

Property Manager · Keller, TX · Member since 2011 · 1k+ posts · 1k+ votes

1y

@Rene Hosman As a property manager with 20 years experience and a portfolio of 1,000+ single family homes, I can say concessions like reduced rent rarely work well for smaller landlords. The only approach I’ve found effective is offering a deposit alternative, which lowers upfront costs for tenants without devaluing your property. Reducing rent sets a precedent and can attract price-sensitive tenants rather than those prioritizing quality.

Negotiating renewal terms can make sense if tied to benefits like lease length or tenant stability, but always ensure it aligns with your long-term goals.

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

1y

This reminds me of the discussion around pricing things at $x.99 instead of $x+1.00.
EXAMPLE: $4.99 instead of $5.00

Everyone "knows" that the price in the example is basically $5.

So, why do billion dollar companies, spending more on marketing departments than everyone's combined income on this thread, STILL use the $x.99 pricing format?

Because it works!

Same goes for many apartment buildings offering MoveIn Specials.

So, if it's slow-time winter or a property won't rent for another reason, why waste time worrying about why it works or how to avoid it?

Go wtih what works - but intelligently.

We offer a free month of rent, but to avoid desperate people, we credit 50% towards their 2nd month (to make sure they can afford 1st month rent + SD) and then credit the other 50% the 5th month. Also, they ONLY earn the credits if their rent for months 2-4 is paid on time.

We feel this encourages/trains good payment behavior:)

We have several MoveIn Specials owners can approve like, free TV, Washer or Dryer (used), etc.

Our main goal with MoveIn Specials is to stand out from our competition.
- Just lowering the rent really doesn't do that.

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Have you ever offered rent concessions to entice potential renters?

Have you ever offered rent concessions to entice potential renters?

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